Over the last 15 years, fine wine has registered an annualised return of 13.6%. The Knight Frank Wealth Report 2022, by the investment index that tracks the value of luxury assets, ranks wine as the best-performing asset of last year (the fourth best in the last 10 years). The Liv-ex Fine Wine 100 index climbed over 10% and the Liv-ex 1000 registered average value growth of 22% across this year.
But the global market scenario at this time has been anything but rosy. The lingering effects of COVID-19, the impact of the Russia-Ukraine war, continued economic turmoil, and ongoing anxiety about the climate crisis has made for a challenging year. Amidst this, fine wine investment has managed to remain stable, thanks to wine’s low-risk slow-return characteristic that can withstand market volatility much better than traditional assets can.
While it is clear that wine is a high-performing alternative investment asset, investors need to be aware of market trends to be able to gain the most out of their investment. Once you know the basics of wine investment, here’s what you need to know going into 2023: –
Experts have a positive outlook for 2023
The 2022 Global Wine Report predicts a positive outlook for 2023. There are several reasons for this; such as the overall strength and resilience of the fine wine segment, the growing demand for fine wines – especially in new and emerging markets, improving standards and innovations in winemaking, as well as increasing interest, consumer knowledge, and investment in the market. There are other reasons, not all of them directly related to the wine sector, that boost market optimism: normalisation of the global epidemiological situation, the increasing popularity of direct-to-consumer practices, and the digitization of the wine market.
These are the markets to watch out for
France dominates the list of wine regions with the maximum potential for 2023, followed by Italy. There is also, however, some concern about decline in the fine wine market of France. There is positive interest in the United States and Australia. Among individual territories, Champagne with its prestigious Cuvées seems poised for positive performance in 2023, followed by Burgundy, Piedmont, and Tuscany.
Champagne – Lighter on the wallet than Bordeaux or Burgundy, Champagne fills the demand for lighter drinking, which is being driven by a large set of consumers of the ‘less is more’ philosophy. In July this year, for example, Comité Champagne announced an increase in the maximum permitted yield to 12,000 kg/ha for the year’s harvest in response to the sharp increase in global demand.
The top labels in Champagne investment wines continue to be Dom Perignon, Louis Roederer, and Krug.
Burgundy – The micro-production of Burgundy makes it an investment favourite. Prices of these wines are high and the availability low, but short-run opportunities may exist for investment. Climate change has been affecting the yield of the region’s harvest, which further makes Burgundy one of the fine wine regions to watch closely.
Domaine Leroy, Domaine Arnoux Lachaux, Domaine Leflaive, and Domaine de la Romanée Conti, all top performers of 2022, will remain among the aspirational brands of next year.
Italy – One asset that has proved robust time and again during periods of crisis is Italian wine, and the country is one to watch out for in 2023. Whether during the Global Financial Crisis of 2008 or the US-China trade war and Hong Kong recession of 2019-20, the Italy-100 on the Liv-ex exchange has fared among the best. There are some excellent vintages coming out of Tuscany, Barolo, and Barbaresco, adding to the investment potential of the wine market.
Consider the Frescobaldi Toscana Gorgona Bianco, 2020 from Italy. The idiosyncratic Tuscan white wine is made by a handful of inmates in Gorgona, a penal colony, who are active viticulturists under a unique rehabilitation project with Frescobaldi. It is an investment to feel proud of.
Note that the top-ranked Italian investment label remains Sassicaia, both by value and volume. In fact, the most powerful investment wines of 2022 are expected to remain on the top investment list next year as well.
… And market trends to watch out for
Franciacorta – Sparkling never goes out of style. While Champagne will continue to perform, Franciacorta’s time is now. These are serious, traditional-method sparklers that are upward in price and prestige and are expanding in reach to new, curious consumers.
Boxed fine wine – As the industry moves towards sustainable practices and carbon-neutral packaging, fine wines in alternative packaging will become more acceptable. Sales of bag-in-box wine have been growing exponentially over the past two years, and it is time for the fine wine market to catch up.
